Contributions from STRS members (teachers), the State and school districts equaled $8,288.519 for 2016. Benefits paid to retirees equaled $13,148.558 for 2016. Contributions are not keeping up with benefits paid to retirees.

Trend Number Two (investment assumption):

STRS used to project a 7.5% rate of return on its investments; in the recent past it downgraded its rate of return to 7.25%; now it is 7.00%. Because of the recent downgrade, the State just increased its contribution rate by 0.5%; this will not make taxpayers happy. Also, new teachers, hired after January 1st, 2013, will see a 1% increase in their contribution rate probably beginning in the year 2018.

Trend Number Three (Global Equity):

The investment portfolio of STRS is diverse. STRS invests in real estate, private equity, global equity, etc. However, 54.8% of its investment portfolio is tied up in global equity. This probably explains why STRS just downgraded its rate of investment to 7.0%. Here are some issues that I have with Global Equity Stocks:

BRIC (Brazil, Russia, India and China) were hailed as the new super economic engines. Newspaper article after article promoted the idea that these four countries would change the global economy so that it would move in an upward trend. This was true for a while. Unfortunately, Brazil’s economy has become anemic due to its vast political troubles (government scandal after scandal). China’s growth has slowed dramatically. Russia’s economy has been underperforming somewhat in part due to the economic sanctions placed on it; plus, its economy is too reliant on oil.

The European Union is still struggling. Spain, Italy, Greece and other European countries are seeing debt choking the breath right out of their economies. Germany is still performing extremely well, but France’s economy is sputtering.

Japan’s economy has not been strong since the early 1990s. Moreover, Japan is going to have some serious economic issues in the near future. Japan’s population is aging and Japan has negative population growth. There won’t be enough workers to pay for the retirees. Plus, the Japanese have the longest life span of any other group of people. Overall, Japan’s economy is headed for disaster.

Based on the economies of other countries, it is my prediction that STRS won’t even reach its 7.0% forecast. I wouldn’t be surprised if STRS reduces its rate of return from 7.0% to 6.75% within the next ten years.

Trend Number Four (U.S. Economy):

The $20 trillion debt and growing cannot be ignored. The U.S. cannot keep increasing the debt ceiling every year. Once the U.S. stops increasing the debt ceiling, then the pain of the $20 trillion debt will settle in. Taxes will increase and government services will be cut. Trump promised he would increase the GDP like we have not seen for some time, but Trump’s rosy economic picture is full of thorns. Unfortunately, he falsely raised the expectations of Americans; there is no way that he can deliver on4%, 5% or even 6% GDP growth. His whole economic plan is based on unbelievable growth in the GDP. This cannot occur because most foreign countries are not doing well if one digs below their economic facades (cannot buy enormous amounts of American goods). Also, the $20 trillion debt is pounding on our door. There are no more IOUs.

What does all of this mean? It means that STRS will have to reduce its pension obligations. Sometime in the future, retirees won’t see any more automatic 2% COLA increases. In fact, retirees might even seen their pensions reduced. Teachers, who will be retiring within the next five to twenty years, will see their promised retirement reduced. Teachers who just entered the profession, I feel sorry for them.

Teachers must plan for a reduced pension. They need to pad their own retirements!!!

Note from this blog’s host: I worked as a classroom teacher in one of California’s many public school districts from 1975 – 2005. During those 30-years, I contributed 8-percent of my gross pay into CalSTRS and the district where I worked contributed another 8.25 percent. I have been retired for 12 years. When I retired, I took a 40-percent pay cut and left with no medical coverage from that district or the state. If you want to know what that job was like, read my memoir “Crazy is Normal, a classroom expose” (link below).

The state of California made promises to its public school teachers.

What happens to retired teachers like me if the state breaks that promise?

How will those teachers pay their rent/mortgage, keep the water running, the electricity on, buy food?

Do billionaires and corporations expect retired teachers to go back to work at 75, 80, 90, or even 100, if we live that long, so those greedy autocrats with more money than God can pay little or no tax?

What happens to the hundreds of thousands of teachers still teaching if the state can’t pay for its promises to them?

I want to leave the readers of this Blog with one thought from Thomas Jefferson, who said, “The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants.”

Most if not all corporate charter schools do not have retirement plans for their teachers, those teachers have no Constitutional due process rights, those teachers are paid less and must work longer hours, and they do not pay into the retirement plans for traditional public schools.

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Lloyd Lofthouse is a former U.S. Marine and disabled Vietnam Veteran, with a BA in journalism and an MFA in writing, who taught in the public schools for thirty years (1975 – 2005).

When I retired, the school district stopped paying me and saved the tax payers money since most teachers that retire after teaching 30 years or more are replaced by younger teachers that are paid much less.

Keeping older, higher paid teachers working longer will only cost the taxpayer more in the long run since those same teachers that are working longer will end up with a larger monthly pension check since the longer a teacher spends in the classroom, the larger the pension.

I’m impressed when a reporter does their job properly and balances the news instead of feeding the mob that bellies up to the slop-trough of Yellow Journalism, which is based on sensationalism and crude exaggerations.

In his piece, Hall wrote, “From state legislatures to Congress to tea party rallies, a vocal backlash is rising against what are perceived as too-generous retirement benefits for state and local government workers. However, that widespread perception doesn’t match reality.”

According the Hall, “Pension contributions from state and local employers aren’t blowing up budgets.” They amount to just 2.9 – 3.8 percent of state spending, on average.

In addition, Hall says, “Nor are state and local government pension funds broke. They’re underfunded …”

With those facts, we should ask what the real reason is why the far-right hate groups are turning on public-worker sector pension plans.

The answer may be Wall Street, Hedge Funds and US bank private-sector greed, the same risk-taking greed with someone else’s money that caused the 2007-08 global financial crises.

According The Council on State Governments, in 2006 before the crash, the total amount of money held by these federal, state and local public-pension plans was almost $6 trillion dollars, and greed—it seems—has no limits.

What Thompson also doesn’t mention in his AP piece is that some states managed their pension funds better than others did.

A March 2011 report on the Best and Worst State Funded Pensions by Adam Corey Ross of The Fiscal Times offers a more balanced picture. Ross wrote, “State pension programs across the country have undergone a major transformation, as more and more of them are cutting back the amount of money they set aside for retired workers, gambling that they can meet their obligations through investments instead of savings …”

In fact, Ross lists the best fully-funded state pensions that existed then, which were: New York, Wisconsin, Delaware, North Carolina, Washington, South Dakota, Tennessee, Wyoming, Florida and Georgia. He also lists the worst state pensions where the gamble did not pay off. However, with Governor Scott Walker in Wisconsin and Cuomo of New York, the public pension plans for those two states are probably doomed along with the public unions in those states if the voters don’t get rid of them in the next election.

California fell between the two lists, but thanks to recent legislations plans to fill the funding gap in a more sensible way. In addition, nowhere does Ross or Thompson mention that California has two state pension plans—CalPERS and CalSTRS.

As Public Pensions Shift to Risky Wall Street, Local Politicians Rake in Political Cash

The California State Teachers’ Retirement System [CalSTRS], with a portfolio valued at $189.1 billion as of June 30, 2014, is the largest teacher pension fund and second largest public pension fund in the United States. In addition, CalSTRS makes it clear that “it’s important to understand that the risk of facing depleted assets exists approximately 30 years from now versus actually facing insolvency today.”

Due to losses from investments during the 2008 global financial crises, the CalSTRS retirement “fund took an enormous hit to its stock portfolio when the market plunged during the heart of the recession, losing nearly $43 billion—roughly 25 percent of its value—from June 2008 to June 2009.”

However, in June 2014, California’s Governor Brown signed Assembly Bill 1469 to stabilize CalSTRS funding in an effort to bridge the nearly $74 billion funding gap that would keep the fund solvent beyond 30 years. Teachers’ Retirement Board Chair Harry Keiley said, “Educators in California do not receive Social Security for their CalSTRS-covered employment and the benefit they earn from years in the classroom serves as the cornerstone of their retirement income. Today’s actions further strengthen the Governor and Legislature’s commitment to uphold the state’s promise of a secure retirement to teachers.”

The vote in the State Senate was 37 – 0, and in the Assembly was 76 – 1. – legislature.ca.gov

Back to the public sector retirement plans that did not follow the risky 401 (k) path to retirement. The Public Sector stayed with employer-based defined benefit pension plans such as the one I have through CalSTRS.

It helps that the union membership rate for public sector workers is 36.2 percent and that is substantially higher than the rate for private sector workers at 6.9 percent.

Discover how California is fixing its public pensions

To understand the numbers better and why the media focuses its Yellow/Hate Journalism circus act to attract the biggest hating mob, in November 2011, the Bureau of Labor Statistics reported that there were 20.4 million public sector employees [2 million work for the federal government—the rest work for the states or local county or city governments] and about 128 million private sector employees.

If you published a newspaper, a magazine, ran a TV news network, hosted a conservative talk show, or wrote a popular conservative Blog, which audience would you focus on to boost advertising rates? As I said, it’s all in the numbers

A, 20.4 millionB. 128 million

Another example of how misleading Don Thompson’s AP piece, Public retirement ages come under greater scrutiny, was: “With Americans increasingly likely to live well into their 80s, critics question whether paying lifetime pensions to retirees from age 55 or 60 is financially sustainable. An Associated Press survey earlier this year found the 50 states have a combined $690 billion in unfunded pension liabilities and $418 billion in retiree health care obligations.”